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Royal Bank of Scotland set for £6 billion technology splurge

02 October 2009  |  12054 views  |  1 Royal Bank of Scotland

Royal Bank of Scotland CEO Stephen Hester has pledged to spend some £6 billion on technology and marketing over the next five years as he bids to revive the fortunes of the distressed UK bank.

Speaking at a Bank of America Merrill Lynch conference in London, Hester said his aim was to reverse the failed past policy of expansion by acquisition in order to re-invest in the business and focus on organic growth opportunties.

"Some of the quality that allows business to grow organically was neglected through a series of distracting business integrations," he told the conference, adding that the bank had underspent on technology and failed to develop an integrated IT system.

RBS turned in UK PLCs largest ever loss last year as the credit crunch squeezed the life out of a bank that had grown through a series of acquisitions, culminating in the ruinous take-over ABN Amro.

As a consequence, RBS had spent more money "dealing with different systems inherited from past acquisitions, than changing the bank," Hester told the conference.

As part of the IT spend, RBS plans to consolidate its existing data centres, replace the current claims system in its insurance business, and deploy newer retail banking technology.

The Edinburgh-based bank has shed some 16,00 jobs in the past year and auctioned off unprofitable business lines as it bids to reduce its cost base by some £2.5 billion by 2011.

Speaking to Reuters ahead of the BofAML conference, Hester said: "The time has come to focus investors' attention on the forward-looking RBS and what our core businesses are as opposed to the businesses we're shutting down, and how that will position us for the future."

Similar talk has been coming from the other side of the pond at Citibank, which recently announced plans to slim down its retail branch network while investing heavily in Internet and mobile banking channels.

Comments: (1)

A Finextra member
A Finextra member | 05 October, 2009, 12:51

This has to be good news and welcomed by all us shareholders. Finally RBS getting to grips. The spend is a huge commitment and its hoped that there are enough knowl how in RBS to pull it off. Failurs will have dire consequences to the business and reputation. I hope RBS take the gloves off and take a good hard look at their technology and be imaginative in the introduction of solutions. They should also be prepared to buy rather than develop. Go for it RBS!  

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